Abrupt German intervention in view of Friday Eurogroup

euro_chairWolfgang Schauble charged on Thursday that Greek demands are nothing but “Trojan Horse” tactics to keep the money flowing, even when Athens has consistently failed to meet the demands of the bailout program.

The German text, translated into English, reads as follows:

German comments on the Greek application

The Greek letter is not clear at all, but opens immense room for interpretation. To mention the 3 most important points: It includes no clear commitment to successfully conclude the current program and its falls short of a clear freeze of Greek measures. It is totally unclear how the Greek government wants to pay its bills over the coming weeks with the current short fall in tax receipts.

This is why the letter is not in line with the last Eurogroup position. It rather represents a Trojan horse, intending to get bridge financing and in substance putting an end to the current program. On this basis it makes no sense to start drafting a Eurogroup statement on Friday. We should aim at three things now:

First, the three institutions should carefully examine the Greek current fiscal position in relation to the letter and give us their advice, as agreed in the last Eurogroup, whether on the basis of the Greek letter a successful conclusion of the current program would be possible, with a sufficient primary surplus and debt sustainability to be assured.

Second, we need a clear and convincing commitment by Greece, which may just contain 3 short and well understandable sentences: “We apply for the extension of the current program, making use of built-in flexibility. We will agree with the institutions any changes in measures from the existing MoU. And we aim at successfully concluding the program”.

Third, Greece has to publicly confirm that it will refrain from unilateral national measures to roll back the current program. The authorities will with immediate effect not take any initiative or implement any measure or policy which is inconsistent with existing commitments under the current program or aggravate the fiscal situation. This includes refraining from announced labor market and social reforms to be voted in Parliament this week.

The 10.9 billion euro, earmarked for banking recapitalization, should not be prolonged since the Greek banks have successfully passed the stress test last year.